Higher theme-park prices help drive big Disney profit growth

February 5, 2014|By Jason Garcia, Orlando Sentinel

Boosted by higher theme-park ticket prices and the unexpected success of the animated film "Frozen," Walt Disney Co. said Wednesday that its quarterly profit soared 33 percent during the final three months of 2013.

But company executives remained vague about when Disney will complete the launch of its billion-dollar MyMagic+ technology initiative or open the Seven Dwarfs Mine Train in the Magic Kingdom, two projects that will likely go a long way toward determining how Walt Disney World fares this year.

Burbank, Calif.-based Disney said it earned more than $1.8 billion during the first quarter of its fiscal year. That was up from a little less than $1.4 billion a year earlier. All of the company's major business segments — theme parks, television networks, movies, consumer products and digital media — posted double-digit growth.

Revenue rose 9 percent to $12.3 billion.

"We had a very strong first quarter," Disney Chairman and Chief Executive Officer Bob Iger said in a conference call with analysts.

The growth was driven primarily by spending increases, as visitors to Disney World and Disneyland in Anaheim, Calif., paid higher ticket prices and spent more on food, drinks and souvenirs. Per-visitor spending in Disney's U.S. theme parks rose 8 percent, and per-room spending in its hotels gained 5 percent.

Domestic attendance was essentially flat. Iger said Disney World set an attendance record during the quarter, but that was offset by declines at Disneyland, which faced a tough comparison with record crowds last year.

Hotel occupancy was also flat compared with a year ago.

Disney's theme-park profits would have been even higher if not for continued spending on MyMagic+, the multitentacled technology that includes microchip-embedded wristbands that function as all-in-one tickets, room keys and credit cards, and a new reservation system, dubbed "Fastpass+," that allows visitors to reserve ride times.

Disney once hoped to have the project launched by last year, but it remains in testing at Walt Disney World. Currently, only guests staying in company-owned hotels are able to reserve ride times before the day of their visits.

Company leaders say there have been some encouraging signs. Iger said many more guests are using the Fastpass+ system than had been using Disney's previous Fastpass system, which used paper tickets.

About half of Disney visitors used the old Fastpass system; the company is aiming to get as many as 90 percent using the new ride-reservation system.

One benefit of the new system so far, Iger said, is that Disney was able to squeeze an extra 3,000 people per day into the Magic Kingdom during the busy holiday period.

But Disney executives also would not say when they expected MyMagic+ to begin generating profit growth for the company.

"This is still a very new product. We're not even close to being able to quantify it in a public sense," Iger said.

Still, the ability to pack more paying customers into the Magic Kingdom — already the busiest theme park in the world, with more than 17 million annual visitors — impressed some analysts.

"You can just see the benefit of that," said Robin Diedrich, a media analyst with Edward Jones. "As those costs start to dissipate over the next several quarters, it [MyMagic+] could be a pretty powerful piece of the story."

It also remains unclear when Disney will open the Seven Dwarfs Mine Train, the capstone of a $425 million Fantasyland expansion, most of which was completed more than a year ago. Disney once said the Mine Train would open this spring but has since shifted to a more vague timeline. Jay Rasulo, the company's chief financial officer, said Wednesday only that it would open "in a few months."

Both MyMagic+ and the Mine Train coaster could be particularly important in helping fend off heightened competition from Universal Orlando, which is about to open a fourth on-site hotel and is expected to open its Wizarding World of Harry Potter — Diagon Alley by summer.

Looking ahead, Disney said its U.S. hotel bookings for the current quarter are up 7 percent from the same point last year at prices that are 2 percent higher.

Companywide, one of the biggest drivers of Disney's quarterly profit growth was its film division, where, thanks to the surprisingly strong performance of the animated film "Frozen," operating profit skyrocketed 75 percent to $409 million.

Profit at Disney's television networks rose 20 percent to $1.4 billion, led by higher affiliate and advertising revenue at sports juggernaut ESPN.

Consumer-product profit jumped 24 percent to $430 million because of improved merchandise licensing and sales at North American Disney Stores, while interactive-media profit ballooned from $9 million to $55 million on the success of the Disney Infinity video-game franchise.